Yesterday, Donald Trump confirmed his plan to implement significant tariffs on imports from China, Mexico, and Canada, starting this month.
The proposal calls for a 25% tariff on goods from Mexico and Canada along with an additional 10% tariff on all Chinese imports.
Trump justified these measures by citing national security concerns, specifically the prevention of illegal drug trafficking and unauthorized immigration.
The stance marks a return to the robust trade policies that were a hallmark of his earlier administration. These tariffs are expected to affect various sectors, potentially disrupting international supply chains and increasing operational costs for American businesses reliant on imported goods.
Tariffs have been used since the 18th Century but aren’t a regularly implemented piece of an administration’s economic plan. Both Presidents Trump and George W. Bush were the most recent presidents to use tariffs to protect the U.S. economy.
Under President George W. Bush, steel tariffs were imposed in 2002 but were lifted after threats of retaliation from the European Union and other trading partners.
President Donald Trump heavily used tariffs as a tool for his trade policy, particularly in the trade war with China. Significant tariffs were also imposed on steel and aluminum imports from various countries, including traditional allies, justified on national security grounds.
Both President’s Tariffs had a consistent result….
While tariffs may achieve the desired result of their application, though that is hard to prove over the long-term, they also bring certain risks to the economy and markets.
Economic Uncertainty
Tariffs often lead to economic uncertainty and trade tensions, which can increase the demand for safe-haven assets like gold. Investors usually buy gold to preserve their wealth amidst volatility and potential downturns in the stock market or economy.
Currency Fluctuations:
Tariffs can also affect currency values. For example, if the U.S. imposes tariffs on another country, it could lead to a depreciation of that country's currency against the dollar. However, if the overall sentiment is that the tariffs will negatively impact the U.S. economy, the dollar might weaken, making gold more attractive as it is priced in dollars globally.
Inflationary Pressures:
Tariffs can lead to higher prices for goods and services, contributing to inflation. Since gold is often considered a hedge against inflation, higher inflation expectations might boost the demand for gold.
Note the underlying message there?
Sure, he didn’t do it in clear words… “Go buy gold!” but his actions are those that historically result in an unusually large rally in gold prices as investors look to hedge their portfolios.
George W. Bush’s use of tariffs triggered a rally in gold that lasted more than a year. That rally took gold prices more than 30% higher. As indicated above, those tariffs were short-lived.
Under President Trump’s administration, when tariffs were more widely used – the price of gold appreciated roughly 20% and then another 50% in the second half of his term, putting gold prices at their all-time highs before leaving office.
The current term gives investors no reason to think that things will be different.
Adding to the demand for gold as a hedge are certain risks around the market.
On Wednesday morning, Jamie Dimon commented that the market is “kind of inflated”. Of the reasons quoted for his gauge on the market, Dimon included deficit spending, inflation and geopolitical upheaval as potential triggers for the market to see volatility on its horizon.
Bottom Line, whether its tariffs or possible volatility in the market, gold is an attractive portfolio holding for most investors right now.
Over the last year, gold prices have gone up more than 35%. That performance is almost 50% better than that of the S&P 500 (SPY) and Nasdaq 100 (QQQ).
While the one-year performance is attractive, the building rally in Gold looks to slingshot prices higher, faster, over the next 3-6 months.
The SPDR Gold Shares (GLD) – an ETF that serves as a proxy for Gold – have ground their way through a two-month trading range that has acted as a “healthy correction” for gold prices.
In November, we saw gold hit its all-time highs as investors were worrying about tariffs and the return of inflation in 2025. The run on gold caused GLD shares to become overbought, requiring either a deep correction or a healthy trading range to cool prices.
The latter occurred as the Gold Shares traded between $250 and $240 from early November to this week, but the shares made a telling move on Tuesday.
Investors turned more bullish on gold as President Trump was signing the various Executive Orders that would begin enacting his aggressive policies.
As a result, the SPDR Gold Shares ran through the top of its range at $250, initiating what is referred to as a “Volatility Rally”.
The last similar rally started in August 2024, taking the Gold Shares 12% higher over the following two months. Investors should expect more of the same with a 3-month target price of $285 followed by another higher target of $300.
Gold Prices are often sensitive to the actions and announcement of the Fed, so investors will want to monitor prices closely as the Fed’s next meeting approaches next week.
The Fed’s outlook on interest rates and inflation will have a direct effect on gold prices, potentially adding volatility to the short-term pricing.
That aside, investors need to keep an eye on the horizon with this trade as the 6–12-month period is more accommodating for the bulls.
As always, the easiest way to take advantage of the outlook and strong trend in gold is to simply buy the APDR Gold Shares (GLD).
While the ETF will not move penny for penny with the price of gold futures, shares do offer a more convenient way to “hold” gold in any brokerage account.
Investors looking for a “Stop” on their holdings to avoid an unforeseen selloff in gold should consider the $240 price as a reasonable exit. This price would break below the recent consolidation, resulting in a shift in sentiment towards gold forcing prices lower.
Investors looking to leverage gold’s rally to $280 and higher may want to consider using long-term call options.
The January 16, 2026, $260 GLD calls are currently priced at $1,705 per contract. That option would have a theoretical value of $2,800 if the price of GLD shares trades to the $280 price target within the next 180 days (6 months).
Resulting returns from the option position would be 64% compared to a 12% return from buying and holding the GLD shares themselves.
As always, investors need to have a firm understanding and education on options and their uses before executing any options strategy.